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When tremors hit Wall Street it is wise to get on solid ground with gold and silver investments.

Post by Janet Jones
on March 21, 2011

March 21, 2011 – When tremors hit Wall Street it is wise to get on solid ground with gold and silver investments.

One of the biggest concerns today is the expected end of Fed stimulus in June. In the Wall Street Journal E.S. Browning asks the basic question: “Is the U.S. economy strong enough yet to grow on its own, without significant government help?” In the opinion of Brett Gallagher at Artio Global Investors, which manages $52 billion, “The whole goal was to create enough momentum … but we have not reached that escape velocity.” The majority of Fed policy makers agree and believe “the Fed should be ready to step in again.”

Americans, however, are not going to be pleased with that. According to the latest Rasmussen Report polls 67% believe we are still in a recession and nearly as many are not confident that the Fed has things under control. Investor confidence is the lowest it has been since early December, down ten points from just one week ago, and consumer confidence remains unusually poor.

Wall Street’s response has been to entice investors back into equities by making it easier for companies to fund higher dividends with the same “controversial lending practices that proliferated ahead of the financial crisis,” says Nicole Bullock in Financial Times.

Covenant-lite loans, which lack investor safeguards, have totaled $30 billion so far this year. At that pace they are certain to dwarf last year’s record total of $100 billion and they have already beaten the second biggest year by 25%. Private equity has stepped up the dangerous practice of funding dividends with debt rather than profits. And the popularity of payment-in-kind toggle notes, which allow payment on debt with more debt, is surging.

We would all be wise to brace for round two and put our money into gold and silver investments.